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Personal Navigation Devices: the end is nigh

Garmin announced today a cut in its revenue and earnings forecast for 2008.

It blamed a challenging macroeconomic climate and intense competition. One bright spot was that “The automotive/mobile segment gross margin continued to be sound at 39% as PND pricing declines moderated.” But this will prove to be a transient plateau in a precipitous decline in the PND market.

Although we continue to earn industry-leading market share, the sector is not growing as rapidly as earlier anticipated and consumers appear to be more cost-conscious than ever.

Garmin may have many strong business opportunities (for example lifestyle-oriented market segments like fitness), but the generic PND is not one of them. The reason is that PND functionality is being built into smartphones. The incremental cost to the phone manufacturer is just a few dollars. The new iPhone is a case in point. It has great mapping software from Google and the screen is large and high-resolution; this PND functionality is effectively thrown in for free.

But it gets worse for PNDs. GPS in phones is intrinsically superior to GPS in PNDs, because the data connection through the cellular service dramatically speeds up time to first fix and can also improve location accuracy.

Garmin appears to have recognized that smartphones will eat its PND lunch, and has embarked on a smartphone development, the Nuvifone. But this is a very, very challenging gamble. The handset business is brutal, not just competition-wise but because of the complexities of regulation, certification and network validation. Garmin must have expected this, but it was still surprised:

The nüvifone will not be available in fourth quarter as previously announced. While we had hoped to have carrier launches in the fourth quarter, we have found that meeting some of the carrier specific requirements will take longer than anticipated.

The Nuvifone may turn out to be a winner for Garmin, but it’s a long shot. It is possible to differentiate on commodity features in handsets, but not in the mass market. An analogy with cameras would be misleading. For GPS there is no essential technical requirement equivalent to a good camera lens in terms of differentiating value in a handset.

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CSR 2Q08 results: in line. Company focusing on “Connectivity Centre”

CSR released its 2Q08 results today. Quarterly revenues are 13% down year on year ($188.4m vs. $215.9m), but in line with expectations and up 17% on Q1. The CEO blamed the decline on “macro economic pressures.”

The press release says that CSR has completed “repositioning the business around the Connectivity Centre.”

What CSR calls the “Connectivity Centre” was the topic of a report I wrote with the Linley Group last year and which we are in the process of updating for 2008. The idea of the connectivity chip is that cell phones have a multiplicity of radios in them these days: several cellular standards and frequencies, Bluetooth, FM radio, GPS, Wi-Fi and some other minor ones. The way it has shaken out so far is that cell phone OEMs have implemented each of the non-cellular radios separately on their phone motherboards, or with two or more of them mounted together on a multi-chip module, or “connectivity chip.” Recently many vendors have started doing single-die implementations of connectivity chips, like Bluetooth plus FM, or Bluetooth plus Wi-Fi.

CSR with its BlueCore 7 is the first to combine Bluetooth (plus Bluetooth LE, formerly Wibree), FM (transmit and receive) and GPS on a single chip. This looks like a winning combination, because these three technologies are the ones with the highest attach rates to cell phones, and CSR has managed to implement the GPS with a sufficiently modest silicon footprint that CSR doesn’t charge for it if the OEM doesn’t want to use it.

Also mentioned in CSR’s results release is the news that the low-power Wi-Fi chip that CSR announced in 2004, the UniFi 2, is finally shipping in phones: “our embedded Wi-Fi product will be shipping in six smart phones by the end of the current quarter.” Actually, one of their analyst presentations appears to indicate that it is already shipping in the Mio A702.

CSR says it is “the only ‘pure play’ connectivity company.” This is passably true, but each of the major cellular baseband companies except Freescale now has, or is in the process of putting together a suite of connectivity products. CSR also says it “is moving fast to create and lead this market.” It will have to move fast. Qualcomm has already swept multiple connectivity technologies into its latest cellular baseband offering. This is the likely end-game for all the cellular baseband vendors. The questions are: is this what the handset OEMs want, and if so, how long will it take?

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Land Line Decline

There’s a good article in Slate giving numbers on Fixed-Mobile Substitution in the US, and suggesting that a recent acceleration is due to the ailing economy:

…this year, the rate of decline of land lines has accelerated sharply. AT&T, which provides wired service in 22 states, just reported its second-quarter results. The wireless sector (72.9 million subscribers) continued to grow, adding 1.3 million net subscribers in the quarter. But revenues in the land-line voice services were down 7.8 percent from the first quarter of 2007. The number of retail consumer lines fell from 37.12 million in 2006 to 35.05 million in 2007, off 5.6 percent. In the first quarter of 2008, the company lost another 870,000 consumer land-line subscribers, or another 2.5 percent.

Verizon is suffering similar land-line declines. By the 2008 first quarter, its wireless unit had added 1.5 million customers since the 2007 first quarter. But the number of residential lines fell from 27.06 million to 24.11 million, a 10.9 percent decrease.

Qwest has seen its number of primary and additional consumer lines fall from 8.63 million in March 2006 to 7.17 million in March 2008, a decline of 17 percent.

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Jott for iPhone and other ASR products

In a previous posting I wished for an iPhone voice memo recorder, and I was disappointed to find that the 2.0 software load still lacked one. I now conclude that this was an intentional omission, yielding the opportunity to the new iPhone third party software community.

Last week I downloaded Jott, a free application, from the iTunes store. It is a serviceable voice recorder, so my wish is fulfilled.

But the beauty of the third party software community concept is that motivated, talented people in hungry startups will go beyond what’s justifiable in a large company like Apple, and this is what Jott has done. It doesn’t just record voice memos, it transcribes them into written text.

It works very well. It uses people to do the transcriptions. I am not sure if the utterances are preprocessed with Automatic Speech Recognition (ASR) and transmitted to humans for verification and correction, or if it is entirely done by people in a call center somewhere. When I mumble the text comes back as “Unclear,” but I can still play back what I said and recognize it for myself.

There are a few other transcription-type applications out there. Spinvox and PhoneTag transcribe voicemail into SMS and email. A great idea. Nuance, the world leader in voice recognition technology, announced a similar service in April.

In contrast to the foregoing, Yap is 100% automated, so to avoid mistakes it has the user verify its efforts. You speak the text you want to send as an SMS (or that you want to search the web for) and Yap renders it as text on your phone’s screen. You correct it and send it off. Yap doesn’t appear to be deployed yet.

Similar to Yap, but already deployed in the real world is Vlingo. I went to the Vlingo website to download a trial, but didn’t when I discovered I would have to buy a Blackberry to try it on. Vlingo was recently adopted by Yahoo! to power its onSearch mobile product. Nuance is suing Vlingo for patent infringement. Nuance has announced an application like this for the iPhone, but a search for “Nuance” in the iTunes store doesn’t yield any results for it yet.

Another ASR granddaddy is Tellme (now owned by Microsoft), which powers the Sprint Live Search service. Tellme also lets developers do free hosted low-volume implementations of their concepts in VoiceXML.

Getting back to my iPhone wish list, I am still baffled as to why it doesn’t do cut and paste. The argument that it would require an awkward user interface was exploded a year ago.

Update July 25th: I neglected to mention some other voicemail transcription services. Here is a comparative review of GotVoice, SpinVox, YouMail, and PhoneTag.

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Femtocell versus Wi-Fi

Rethink Research has published an interesting article relating the new Wi-Fi voice certification to the outlook for femtocells.

The idea of the article is that voice over Wi-Fi for cell phones is competing with femtocells, and that femtocells may win out. The article distinguishes between business voice and consumer voice, saying that service providers see femtocells as “an important stalking horse for greater control of corporate customers. ” This gives a hint of why femtocells may be unattractive to businesses: many of them would rather not yield this control.

Consumer voice service is controlled by service providers. They have three options in this space: do nothing, deploy femtocells or deploy Wi-Fi. Do nothing is the obvious best choice, since neither of the other options carries a revenue upside. But poor coverage in a home discourages usage and risks cancellations of subscriptions. So in areas of poor coverage something like femtocells or UMA (voice over Wi-Fi) is attractive to service providers. For both technologies the service provider subsidizes the wireless router, but femtocells will remain more expensive than Wi-Fi routers because of their lower sales volumes, so Wi-Fi is more attractive on this count. But UMA requires phones with Wi-Fi, while femtocells will work with any phone in the service provider’s line-up, including legacy ones. So the customers’ experience of femtocells is better – they can choose or keep the phone they want and still get improved coverage at home. This benefit of femtocells clearly outweighs the marginal price advantage of Wi-Fi routers. Femtocells may help subscriber retention in another way: a Wi-Fi router is not tied to any particular cellular service provider, while a femtocell only works with the carrier that supplied it.

The situation in businesses is different. They generally prefer to control their own voice systems, which is why they have PBXs. But a substantial number of business calls are now made on cell phones, even on company premises. These calls don’t go through the PBX, so they are not least-cost-routed and they are not logged or managed by the IT department. Femtocells don’t fix these problems, but Voice over Wi-Fi does. Not service provider Voice over Wi-Fi, like UMA, but SIP-based Voice over Wi-Fi from companies like DiVitas and Agito. What about phone choice though? Won’t corporate customers be stuck with a limited choice of handsets? The answer is yes, only a limited number of phones have Wi-Fi: less than 10% of those sold in 2008. But in the category of enterprise smart phones, like the Nokia Eseries and Blackberries, the attach rate of Wi-Fi will soon be close to 100%.

So femtocells are a good way for service providers to remedy churn caused by poor residential coverage for consumers, but Wi-Fi may be the better option for businesses that want to regain control over their voice traffic.

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More on Ozmo

A while back I wrote about Ozmo, a company that plans to replace Bluetooth with Wi-Fi in certain applications.

Ozmo’s pitch is that their special version of Wi-Fi is faster, less prone to interference, cheaper and more power efficient than Bluetooth. Though slow for Wi-Fi, Ozmo’s data rate of 9 Mbps is way better than the 3 Mbps of Bluetooth 2.1 plus EDR. Concerning interference, Bluetooth transmissions are in the same 2.4 GHz frequency range as Wi-Fi, so careful engineering is always needed for coexistence; but coexistence is not an issue for Ozmo, because it is a flavor of Wi-Fi. The lower-cost part of the story is that while an Ozmo chip for a peripheral is roughly the same price as a Bluetooth chip, it saves the need for a Bluetooth chip in the host device. So if Ozmo’s claims of double the battery life of Bluetooth turn out to be valid when tested, the pitch holds water.

Bluetooth is unshakably incumbent in the billion-unit-per-year mobile phone market; most phones are now shipping with Bluetooth. But in laptops the Bluetooth attach rate is still well under 50%, while the Wi-Fi attach rate is close to 100%. So it makes sense that Ozmo is focusing initially on the computer market. Ozmo enables a laptop to use wireless peripherals like mice, keyboards, game controllers and headsets with a software modification to the Wi-Fi rather than having to include a USB wireless receiver in the package.

Ozmo is also focusing on the Consumer Electronics market, where Wi-Fi is gaining traction, and where the ability to support wireless remotes and similar peripherals can be added ‘free of charge’ to a device that already has Wi-Fi.

Since this is a compelling proposition, OEMs in these markets are likely to fall into line relatively easily, and indeed Ozmo has already secured the support of the biggest fish in the PC pond, Intel.

It may be a harder sell to the peripheral manufacturers. For them it’s not just a software upgrade. It is a new product line, one that depends on a single source for a key component and that sells into a currently non-existent base of host devices.

On the other hand, the peripheral device manufacturers may not be oposed to a new product line – they already have a plethora of products, using a variety of connectivity technologies including proprietary ones. Adding another one may not be too arduous, especially if it removes the need for a USB part. Ozmo could overcome the non-existent base issue by supplying, or convincing Intel and the other PC Wi-Fi chip vendors to supply, upgraded drivers for legacy Wi-Fi devices.

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Wi-Fi certification for voice devices

In news that is huge for VoWi-Fi, the Wi-Fi Alliance announced on June 30th a new certification program, “Voice-Personal.” Eight devices have already been certified under this program, including enterprise access points from Cisco and Meru, a residential access point from Broadcom, and client adapters from Intel and Redpine Signals.

Why is this huge news? Well, as the press release points out, by 2011 annual shipments of cell phones with Wi-Fi will be running at roughly 300 million units. The Wi-Fi in these phones will be used for Internet browsing, for syncing photos and music with PCs, and for cheap or free voice calls.

The certification requirements for Voice-Personal are not aggressive: only four simultaneous voice calls in the presence of data traffic, with a latency of less than 50 milliseconds and a maximum jitter of less than 50 milliseconds. These numbers will produce an acceptable call under most conditions, but a network round-trip delay of 300 ms is generally considered to approach the limit of acceptability, and with a Wi-Fi hop at each end running at the limit of these specifications there would be no room in the latency budget for any additional delays in the voice path. The packet loss requirement, 1% with no burst losses, is a very good number considering that modern voice codecs from companies like GIPS can yield excellent sound quality in the presence of much higher packet loss. This number is hard to achieve in the real world, as phones encounter microwave ovens, move through spots of poor coverage and transition between access points.

Since this certification is termed “Voice-Personal,” four active calls per access point is acceptable; a residence is unlikely to need more than that. Three of the four access points submitted for this certification are enterprise access points. They should be able to handle many more calls, and probably can. The Wi-Fi Alliance is planning a “Voice-Enterprise” certification for 2009.

There are several things that are good about this certification. First, the WFA has seen fit to highlight voice as a primary use for Wi-Fi, and has set a performance baseline. Second, this certification requires some other certifications as well, like WMM power save and WMM QoS. So far in 2008, of 99 residential access points certified only 6 support WMM power save, and of 52 enterprise access points only 13 support WMM power save. One of the biggest criticisms of Wi-Fi in handsets is that it draws too much power. WMM power save yields radical improvements in battery life – better than doubling talk time and increasing standby time by over 30%, according to numbers in the WFA promotional materials.

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Making lemons into lemonade

Phybridge is a Canadian startup (founded May 2007) aiming to solve some of the problems of VoIP implementation. Its premise is that in many cases, an organization seeking to move from a traditional TDM phone network to a VoIP network does not have an Ethernet LAN capable of supporting VoIP. This inadequacy may result from insufficient capacity, QoS or reliability.

The conventional solution in these cases is to upgrade the Ethernet network while junking the old phone wiring.

Phybridge proposes to leave the Ethernet network alone, and to reuse the old phone wiring to implement a parallel data network, using Ethernet over a flavor of DSL. This is similar to HomePNA, but aimed at business use rather than consumer, and done point-to-point rather than into a shared medium.

The solution consists of two parts: a central box called “Uniphyer” has 24 ports connected to the legacy phone wiring. At the other end of each cable run is a “phy adapter” the size of a pack of cigarettes that you plug into the legacy phone jack, and into which you plug your Ethernet VoIP phone.

The Uniphyer provides power over the same copper pair as the data, so you can plug power-over-Ethernet phones into the client adapters.

The data rate is 3 megabits per second upstream, 30 down. This is slow for a data network, but certainly adequate for VoIP, so an organization that is replacing a conventional PBX phone system with a VoIP one may find Phybridge a cost effective solution if their existing data network isn’t up to VoIP, and the required improvements are extensive.

The Uniphyer is scheduled to launch at the end of September.